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This analysis focuses on poverty in families
headed by single mothers who work. In recent years, large numbers of families headed by
single mothers have moved from welfare to work. This report addresses the question whether
and to what degree those who work have improved their economic situation.

Among people in families headed by working single mothers,
there was no progress in reducing poverty between 1995 and 1999, despite an expanding
economy. Reductions in poverty as a result of economic growth were entirely offset by
increases in poverty due to contractions in government safety net programs.

Before counting the benefits of government safety net programs
(including cash and non-cash programs such as food assistance and housing subsidies) as
well as taxes and the Earned Income Tax Credit, the poverty rate for people in working
single-mother families fell from 35.5 percent in 1995 to 33.5 percent in 1999. Poverty
measured before counting government benefits and taxes primarily reflects the
impact of changes in the economy on private sources of income, especially earnings.

But after counting government benefits and taxes, the
poverty rate among people in working single-mother families was 19.4 percent in 1999
 not significantly different from their 19.2 percent poverty rate in 1995.

This is in contrast to the earlier 1993 to 1995 period, when
poverty rates dropped for people in working single-mother families, both before and after
counting government benefits and taxes. During this period, which preceded enactment of
the 1996 welfare law, safety net programs for low-income working families expanded and had
a larger impact in reducing poverty among these families. This added to the effect of the
economy in reducing poverty.

Between 1993 and 1995, the poverty rate for people in working
single-mother families edged down from 36.6 percent to 35.5 percent, before counting
government benefits and taxes.

After these benefits and taxes are counted, the poverty rate
for people in these families fell more sharply, from 24.5 percent to 19.2 percent.

Among families with children that are not headed by
single mothers, poverty rates dropped during the entire 1993 to 1999 period, both before
and after counting government benefits and taxes.

Before counting government benefits and taxes, the poverty
rate for other families with children dropped from 14.7 percent in 1993 to 10.6 percent in
1999. After these benefits are counted, the poverty rate for these families fell from 10.7
percent to 6.8 percent over the same period.

In addition, the "poverty gap" for people in
families headed by a working single mother has grown larger since 1995. (The poverty gap
is the amount of money needed to bring all poor people up to the poverty line and measures
the depth or severity of poverty.) These data show that working single-mother families
that are poor have, on average, gotten poorer.

After counting government benefits and taxes, the total
poverty gap for people in working single-mother families grew from $5 billion in 1995 to
$6.3 billion in 1999. By comparison, the poverty gap for people in working families with
children that are not headed by single mothers fell during this period.

Between 1997 and 1999, the number of poor people living in
families headed by a working single mother declined from 4.3 million to 4.2 million.
During the same period, the poverty gap for these families rose from $5.8 billion to $6.3
billion, after counting government benefits and taxes. This shows that, on average,
working single-mother families that were poor became poorer.

As a further indication of the increasing depth of poverty
among working single-mother families, the average poverty gap, as calculated per poor
person in these families, rose from $1,357 in 1997 to $1,505 in 1999, after counting
government benefits and taxes. In 1999, the per-person poverty gap for these families was
at its highest level since 1993. By contrast, the per-person poverty gap for other working
families with children remained below $1,200 and did not increase over the period from
1993 to 1999.

A major factor in the lack of progress in reducing poverty
among people in working single-mother families after 1995 was the contraction of certain
government safety net programs.

In 1995, some 46 percent of people in working single-mother
families who were poor before counting government benefits were lifted out of poverty by
these benefits (i.e. their incomes rose above the poverty line when these benefits were
included in their income). By 1999, the proportion of people in these families who were
lifted out of poverty by government benefits had dropped to 42.2 percent.

In 1995, government safety net programs reduced the poverty
gap for working single-mother families by 67.9 percent compared to the poverty gap these
families faced before counting these benefits. In 1999, government benefits reduced the
poverty gap for these families by 60.5 percent.

This decline in the anti-poverty impact of government benefit
programs occurred in spite of the increasing effectiveness of the Earned Income Tax Credit
in reducing poverty among people in working single-mother families. The increase in the
anti-poverty effect of the EITC was more than offset after 1995 by a substantial decline
in the impact of cash assistance and food stamps.

In 1995, the EITC lifted out of poverty 20 percent of people
in working single-mother families who would otherwise be poor; in 1999, the credit lifted
out of poverty 26.7 percent of people in these families.

But the proportion of people in working single-mother families
who were lifted out of poverty by cash assistance and food stamps fell sharply, from 15.5
percent in 1995 to 10.4 percent in 1999, with the decline particularly marked in the food
stamp program.

In 1995, cash assistance reduced the poverty gap for people in
working single-mother families by 21 percent; by 1999, cash assistance reduced the poverty
gap for people in this group by 13.6 percent.

Similarly, in 1995, the combination of cash assistance and
food stamps reduced the poverty gap for people in working single-mother families by 35.6
percent. In 1999, these benefits reduced the poverty gap for these families by 26.4
percent. This is a drop of more than one-fourth in four years in the impact of food stamps
and cash assistance on the poverty gap for people in these families.

These findings suggest that after 1995, declines in the
effectiveness of the safety net in reducing poverty among families headed by working
single mothers offset the effect of the improving economy, halting the reduction of the
poverty rate for these families and pushing those who remained poor deeper into poverty.